Vantage Drilling Company (VTG)

It’s not just Seadrill (SDRL-4.7%) - Transocean (RIG+2.3%), Diamond Offshore (DO+1.2%) and others also have rigs working for Petrobras (PBR+5.9%), but analyst Lenny Zephirin is not particularly concerned.

SDRL said earlier that it was removing $1.1B worth of Petrobras orders from its backlog due to the ongoing corruption scandal affecting the Brazilian company.

Zephirin Group’s Lenny Zephirin upgrades Seadrill (SDRL+9.3%), Noble Corp. (NE+4.4%) and nearly every other offshore driller in the firm's coverage, citing a significant change in market sentiment as mounting doubt of a recovery of oil prices that had held down share prices of offshore drillers reverses.

SDRL and Hercules Offshore (HERO+13.1%) are raised to Buy Speculative Risk from Sell, Ocean Rig (ORIG+10.4%) is lifted to Buy High Risk from Sell, NE and Diamond Offshore (DO+0.4%) is upgraded to Hold Speculative Risk from Sell, Ensco (ESV+2.4%) is lifted to Hold High Risk and Vantage Drilling (VTG+8.8%) to Hold Speculative Risk; the already had Buy rating for Transocean (RIG+5.9%) and Rowan (RDC+3.2%).

Energy stocks are higher across the board as crude oil trades up 4.2% at $51.66/bbl and sits nearly $9/bbl above its January low.

Jefferies analysts still see challenges, in particular for RIG's 5th G fleet as rigs scramble down market/incur idle time; also, the potential for prolonged weakness in the North Sea leads the firm to lower estimates for FY 2016 even as it is "modestly more comfortable" that a broader 2016 recovery could still be in play.

UBS thinks RIG will have to make the decision to either reduce the dividend or increase its debt by 2015; dayrate already are down 25%-40% from peaks levels, and pressure likely will continue given limited rig demand and fierce competition, and regular dropdown proceeds from the MLP probably will not provide quite enough help for RIG's free cash flow.

XCO also offered mixed Q2 results - a $0.01 earnings miss with a revenue beat - but said increased capex would not result in significant production volumes until 2015.

Global Hunter - while also downgrading Natural Gas Services Group (NGS+0.3%) and Vantage Drilling (VTG+0.1%) - thinks the market is showing fatigue in the sector, particularly with positive onshore oil service data points that may no longer seem incremental.

The pace of customer spending growth is expected to be lower this year compared with last year, NE says in its earnings call, and that's with 38 ultra-deepwater rigs around the world looking for work vs. 22 a year ago.

The market for shallow-water rigs also looks wobbly, as Hercules Offshore (HERO-16.3%) said yesterday in a fleet status report that it suspended plans to reactivate a shallow-water rig in the Gulf of Mexico.

Vantage Drilling (VTG-7.4%) slides after the company announced a proposed $75M offering of convertible senior notes Wednesday. This morning, VTG announced the pricing of the offering (which turned out to be $85M): The notes are convertible at the company's election to ordinary shares at an initial rate of $2.39/ share. The deal has a host of stipulations and conditions that should perhaps be reviewed by shareholders. (PR)

Vantage Drilling (VTG+3.3%) says the Aquamarine Driller's customer in Malaysia has exercised the first of its one-year options, extending the current contract to Nov. 2013. VTG expects the exercise of the option will generate ~$56M in revenue over the extension period.

Vantage Drilling (VTG+5.6%) trades higher after the company agrees to acquire the rights for the ultra-deepwater drillship known as Dragonquest for $164M. After delivery, Dragonquest is expected to be used in the Gulf of Mexico, pursuant to a 8-year contract with Petrobras.

Shares of Vantage Drilling (VTG) ride an upgrade from Dahlman Rose 10.7% higher. Analysts raise up their rating on the offshore driller to Buy from Hold after deciding that the company is likely to finance two of its drillships without taking on additional equity.

Vantage Drilling Co is an international offshore drilling company engaged in contract drilling units, related equipment and work crews, on a dayrate basis to drill oil and natural gas wells for its customers.